Comparative Study of e-tourism between Austria and Hokkaido (Japan)

Comparative Study of e-tourism between Austria and Hokkaido (Japan) Master Thesis submitted in fulfillment of the Degree Master of Business Administration in Tourism Management Submitted to Prof. Dr. Alfred Taudes Akiko Tanaka (Student ID Number 0912575) Vienna, Austria, 31 March 2011 0

Preface Tourism is a complex product. Many suppliers and stakeholders are involved in supply chain. For the customers, it cannot be tested it beforehand. There is a distance between the time of purchase and the place when it is utilised. Therefore information is intensively required at the point of planning travel before purchase. Tourism products are dominated by information. Information technologies have accelerated changes in tourism of consumer behaviour and industrial structure. The internet is used not only for information gathering but also for comparisons with the destination and its products. Potential customers have better access to information resources through the internet than by traditional means. As a consequence, the value of information is decided by the consumer s perception and experience. On the one hand, information technologies have offered tourism organizations global reach. Destinations can be visible and comparable worldwide through internet permanently. Websites are a significant marketing tool for reaching the bigger market. However it has brought an increase in global competition. The internet has provided opportunities for business growth and threats to the destination management. Currently, organizations who could offer value to the right customer segments and are capable of e-tourism management would achieve tourism objectives successfully. Austria, one of the leading international tourism countries, is ahead in tourism destination management. Austrian tourism industry is attentive to changes of consumers demands and building B2C online relationships in marketing strategy. This thesis is a comparative study of Austria and Hokkaido of Japan in e-tourism by means of measuring the competence of tourism organizations through industrial analysis, website evaluation in qualitative and quantitative approaches and systematic benchmarking, and investigating the correlation of e-tourism management and tourism growth of the destination. Accordingly, conclusions will suggest some recommendations to be applied by destination management organizations in Hokkaido. 1

Acknowledgements I would like to express my sincere gratitude to all those who made the thesis possible and supported me in any respects for achieving this Master degree of Business Administration in tourism management. I wish to extend my deepest gratitude to my supervisor, Professor Dr. Alfred Taudes, who suggested me the topic for my thesis. His encouragement, guidance and support from the initial to the final level enabled me to develop the subjects and accomplish this thesis. Also I am deeply thankful to Vienna Tourist Board, Vienna Chamber of Commerce and Industry and Vienna Business Agency for supporting me throughout my study at Modul University Vienna. I wish to extend my warmest thanks to Austrian National Tourist Office, Hokkaido Government, Hokkaido Tourism Organization and the respondents to questionnaire, who helped me in exploring my researches. I wish to thank my best friends, Zoë Kara Hili and Martin Lehnfeld for their friendly support and encouragement to me for getting out from difficulties during the completion of MBA study and this thesis. Lastly I am deeply thankful to my parents. Without their understanding and support, I could not have the opportunity to study at Modul University Vienna. 2

List of Contents 1. Introduction 9 2. Current Status of Tourism Industry in Hokkaido 11 2.1 Overview of Hokkaido 11 2.2 Tourism Organizations in Hokkaido 12 2.2.1 Role of the Hokkaido Local Government in Tourism 12 2.2.2 Tourism Organization Structure in Hokkaido 13 2.3 Current Tourism Status in Hokkaido 14 2.3.1 Market Volume 14 2.3.2 Guest Mix 17 2.3.3 Seasonality 19 2.3.4 Demands by Foreign Visitors 19 2.4 Comparison of Hokkaido Tourism Industry with Austria 21 3. Key Factors for Successful Tourism 30 3.1 Internal Factors 30 3.1.1 Supply and Demand 30 3.2 External Factors 34 3.3 Case Study of Market Research by Vienna and Hokkaido 35 3.4 SWOT Analysis of Hokkaido Tourism 37 4. Performance Level of e-tourism 40 4.1 The Role of Information and the Internet in Tourism 40 4.1.1 Social Media in Tourism 42 4.1.2 WWW. Presence in Tourism 47 Phase I: Keywords Search by Google 47 Phase II: Destination Search in Social Travel Media 50 3

Phase III: Language Presence Research in Tourism Suppliers 53 4.2 Evaluation of Destination Websites 57 4.2.1 Methodological Approaches to Website Evaluation 57 4.2.1.1 Three Steps to Research Execution 61 4.2.2 Checklist Development 62 4.2.3 Questionnaire Development 64 5. Results and Discussions 65 5.1 Checklist Results 65 5.2 Questionnaire Results 73 5.3 Strengths and Weaknesses of the Hokkaido Destination Website 78 5.4 Case Study of Austrian National Tourist Office and Vienna Tourist Board in e-marketing Strategy 82 6. Suggestions for Improvement to Hokkaido 88 7. Conclusions 95 8. References 99 Appendix 1: Hokkaido Bednights Report 2009 by Month 104 Appendix 2: Tourism Statistics for Austria 2009 by TourMIS 105 Appendix 3: Tourism Statistics for Vienna 2009 by TourMIS 107 Appendix 4: Checklist Scorecards of Website Evaluation 109 Appendix 5: Questionnaire for Website Evaluation 113 Appendix 6: Questionnaire Results 117 Appendix 7: Performance Level of Questionnaire Results 124 Appendix 8: Questionnaire Results by Sample 125 4

List of Tables and Figures Table 1: Hokkaido Arrivals 2004-2009 and its Breakdown 15 Table 2: Top 7 Destinations in Hokkaido 2009 by Arrivals 16 Table 3: Changes of Foreign Visitors 2004-2009 in Arrivals and Bednights 17 Table 4: Top 3 Japanese Destinations by Bednights 2009 (by province) 18 Table 5: Top Source Markets 2009 in Austria, Vienna and Hokkaido (Bednights) 23 Table 6: Seasonality Comparison of Monthly Bednights 2009 by Foreign 24 Table 7: Comparison of Organizational Structure 25 Table 8: Accommodations Comparison 2009 26 Table 9: Comparison of Transport Infrastructure between Austria and Hokkaido 28 Table 10: Turnover by Japanese Leading Travel Agencies and Size of Tourism 29 Table 11: Comparison of Interaction Presence between Traditional Website and Social Media 43 Table 12: Number of Blogs in the Japan Blog List 45 Table 13: URL Results using Paired Keywords in Each Native Language by Google 49 Table 14: List of Social Media 50 Table 15: Website Presence in Incoming Agencies in Vienna and Japan 54 Table 16: Accommodations in Vienna 54 Table 17: Website Presence in Accommodations in Vienna and Hokkaido 55 Table 18: Travel and Tourism-related Website Evaluation Studies from 1996 to July 2009 60 Table 19: Summary of Methods used in Travel and Tourism-related Website Evaluation Studies from 1996 to July 2009 61 Table 20: Organization Names and Website Addresses used in this Study 62 Table 21: Performance Scores by Checklist Evaluation 66 Table 22: Search Engine Listing Results by Keywords Search of HTO and ANTO 73 Table 23: Process of Consumer Satisfaction Level on the HTO Website 78 Table 24: Sinus-Milieus in Europe and North America 83 Table 25: Comparison of Main Menu and Submenu in the Top Menu Bar 86 Table 26: Suggestion for Menu Presentation to Hokkaido Destination Website 93 5

Figure 1: Tourism Organization Structure in Hokkaido 14 Figure 2: Comparison with Day Visitors and Overnight Visitors in Hokkaido 15 Figure 3: Guest Mix by Bednights 2009 18 Figure 4: Seasonality Comparison by Foreign and Overall Bednights 2009 19 Figure 5: Market Share Comparison in Bednights 2009 23 Figure 6: Tourism System 33 Figure 7: Knowledge of Consumer vs. Complexity of the Product 41 Figure 8: Screen Shot of Google Search Setting 48 Figure 9: Screen Shot of Google Search Result 48 Figure 10: Language Appearance of Online Tourism Information by Destination by Google Search 50 Figure 11: Screen Shot of Destination Search in Social Media, Lonely Planet 51 Figure 12: Screen Shot of Destination Search Results in Social Media, Lonely Planet52 Figure 13: Destinations Search in Social Travel Media 53 Figure 14: Image of Evaluation Approach 62 Figure 15: Performance Level by Checklist Results of HTO and ANTO 65 Figure 16: Marketing Logos in HTO Website 70 Figure 17: Performance Level by Questionnaire Results of HTO and ANTO 74 Figure 18: Relationship of Top Menu Bar and Destination Attributes on Austria 84 Figure 19: Provisional Logo for Hokkaido 89 6

Definitions and Abbreviations ANTO: BSC: B2BC: B2B: B2C: CTW: CY: C2B: C2C: DMO: DMS: EU: FIT: FY: GDP: HTO: IT: JNTO: JR: JTA: MLIT: NTO: OTA: OTW: ÖBB: RTA: RTA: SIC: SME: SWOT: TB: TG: TM: Austrian National Tourist Office (Österreich Werbung) Balance Score Card Business to Business and Consumers Business to Business Business to Consumers City Tourism Website Calendar Year Consumers to Business Consumers to Consumers Destination Management Organization Destination Marketing System Europe Union Fully Independent Traveller Financial Year Gross Domestic Product Hokkaido Tourism Organization Information Technology Japan National Tourism Organization Japan Railways Japan Tourism Agency Ministry of Land, Infrastructure, Transport and Tourism, Japan National Tourism Organization Otaru Tourist Association Official Tourism Website Austrian Federal Railways (Österreichische Bundesbahnen) Regional Tourism Authority Regional Tourism Organization Standard Industrial Classification Small and Medium Enterprise Strengths Weaknesses Opportunities Threats Analysis Travel Blog Online Travel Guide Online Travel Magazine 7

TourMIS: Tourism Marketing Information System TW: Travel Website VTB: Vienna Tourist Board (Wien Tourismus) WTO: World Tourism Organization WWW: World Wide Web 8

1. Introduction Since 2003 Japanese government has endeavoured to develop Japanese international competitiveness in tourism. In order to enhance inbound tourism, the Visit Japan Campaign has been launched as part of a national plan with the goal of having 10 million foreign visitors come to Japan in 2010 and 15 million in 2013 [1]. The provisional report for 2010 by Japan National Tourism Organization (JNTO) shows that unfortunately, only 8.6 million foreign visitors came to Japan [2]. In comparison 15.5 million Japanese travelled overseas in 2009 [3], but only 6.8 million foreign tourists visited Japan in 2009 which is less than half the volume of outbound travellers (source: JNTO) [4]. In 2009, bednights by foreign visitors in Japan accounted for only 6 % of total nights. Can we conclude that Japan is really attracting foreign markets? The World Tourism Organization (WTO) forecasted that international tourism arrivals are expected to reach 1.6 billion by the year 2020 [5]. This figure represents an average annual growth rate of 4.1% between 1995 and 2020. Long-haul travel will grow by 5.4% over the same period by 2020, while intraregional travel will be 3.8% lower than the average annual growth rate. The East Asian and the Pacific regions are expected to show a significant increase, its share will reach up to 25%, and become the second most visited destination worldwide by 2020. Japan is expected to play a significant global role in the East Asian region. Is Japan able to meet such an increase in demand? Hokkaido is the prominent destination for summer and winter leisure and the second most popular tourism destination in Japan (by bednights) after Metropolitan Tokyo (see Table 4). Hokkaido, however, has a unique character in their source market. Approximately 85 % of visitors are from the Hokkaido local province, 70% are day visitors [6]. As assumed, bednights by foreign visitors accounted for a very small share of the market, approximately 6.4% on average in the past three years from 2007 (see Table 3). Hokkaido and Austria have many similarities. They have a similar land area, are at the same northern latitude and are rich in tourism resources like nature and culture through the year. Also, just as in Austria, since they have been hosts to some of the Winter Olympic games, they have become well-known worldwide as a winter leisure destination. So, why is Hokkaido not as successful as Austria with regards to inbound tourism? 9

Recent internet technologies (IT) have surfaced as one of the key factors contributing to the growth of the tourism industry (Douglas and Mills, 2004, p272). Tourism businesses are increasingly engaged in e-business models to achieve their marketing goals, where a large number of holidays are planned and transacted. Tourism goes e-business. A lot of tourism literature explored website evaluations using several methods and have noted the potential of websites in tourism business management. Maintaining an effective website has become vital for a business to strengthen its customer relationships and gain a larger market segment (Law, Qi and Buhalis, 2010, P297). How competent is the information system of Hokkaido? The purpose of this thesis is to investigate the tourism competence of Hokkaido and examine the correlation of e-tourism management, i.e. information system and tourism growth of Hokkaido. First, the thesis explores the size and structure of Hokkaido tourism industry. Then, other issues affecting tourism are discussed. The findings of industrial analysis would give us an overview of their competence level, and the website evaluation in qualitative and quantitative approaches and systematic benchmarking with Austrian tourism industry would be efficient methods for identifying their strengths and weaknesses. Accordingly, these are expected to suggest some solutions for improvement to be applied by local governments and destination management organizations (DMOs) in Hokkaido for meeting the global tourism growth by 2020. 10

2. Current Status of Tourism Industry in Hokkaido 2.1 Overview of Hokkaido Hokkaido is located at the northern end of Japan, at almost the same northern latitude as Austria. Its area is about 78,420 km2 (as of 2009) and has a population of 5.6 million (as of 2008) [7] which is the 7 th largest province in Japan [8]. These figures are on a similar scale to the Republic of Ireland (70,273 km2/4.5 mil) [9]. Hokkaido comprises one fifth of Japanese land areas, yet only 4.4% of the population lives there [8]. Of concern, is that it is estimated seriously that their total population will decrease by approximately 950,000 people between 2005 and 2030, and the aging ratio will increase by up to 35.6% [10]. The gross domestic product (GDP) of Hokkaido is 19,661 billion Yen in the financial year (FY) 2004, which reached 3% of the national total. Tourism and light industry has increased to such an extent that it is replacing primary industry such as agriculture and dairy farming. Approximately 70% of the employed in Hokkaido are engaged in tertiary industry by the service sector, which contributed around 77% of GDP of Hokkaido [8]. Hokkaido has three coastlines, and is full of natural resources which include six national parks [11]. Such geographical character gives Hokkaido cool dry summers and cold winters which is a distinct advantage as a prominent destination, which attracts leisure tourists for the whole year. Hokkaido has more to offer than just its fascinating scenery, as each season has its own respective and attractive characteristics. Since hosting the winter Olympic Games in 1972 in Sapporo, Hokkaido has been well known as a popular destination as a winter sports resort. During summer time, tourists can enjoy beautiful meadows and landscapes in untouched nature, hiking and trekking to mountains, native alpine plants, and sky and water sports. As the native inhabitants of Hokkaido, the Ainu are a huge part of Hokkaido s history. However, it is only recently that the Ainu have been recognized as an important part of Hokkaido s cultural heritage. Visitors to Hokkaido can commune not only with its nature but its local native culture with which it s unique lifestyle of local people in harmony. In July 2005, the northernmost peninsula ʻShiretokoʼ was registered by UNESCO as a natural world heritage [11]. These represent the tourism diversity of Hokkaido. 11

2.2 Tourism Organizations in Hokkaido 2.2.1 Role of the Local Government in Tourism On January 2007 Tourism Nation Promotion Basic Law came into effect by Japanese government [12], which set tourism business as one of the national schemes; To develop internationally competitive tourism and highly appealing tourism destinations To enhance international competitiveness of tourism industry and develop individuals who will contribute to the tourism promotion To promote international tourism and to roll out measures needed to create an environment conducive to travel This law specifies that local governments shall work on plans and implement measures, taking advantage of regional characteristics and pursue broad-based cooperation. It has officially identified the importance of tourism and that tourism contributes to local and national economy by generating employment, business opportunities and benefits to the local community. In order to accomplish this law and its action plans such as Visit Japan Campaign in a systematic manner and make coordination across the public and private sectors, the Japan Tourism Agency (JTA) was established as an extra-ministerial bureau under the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) on October 2008. Consequently, tourism development has become an important administrative module to the local governments who have suffered from impoverished local industry and economy. In other words, tourism business development is the national strategy not only to Hokkaido but also to all potential local governments in Japan, as well as international competition followed by many overseas countries and destinations. Tourism is becoming a real global business just like other mega industries such as automotive and electronic, where the domestic supplier has to compete with long distance destinations (Werthner and Klein, 1999, p38). It should be noted here that Hokkaido tourism is now facing higher global competition. 12

2.2.2 Tourism Organization Structure in Hokkaido The Bureau of Tourism of Hokkaido is formed by five sub-working groups attached to the Department of Economic Affairs in the Hokkaido Government Office. They are responsible for destination management, planning activities, marketing, training and education in respect of political and legal administration. Their respective function is; Tourism Strategy Group: Budget and accounting control, liaison with other departments and organizations, PR and information, application of national measures and policy. Network Management Group: Coordination with Hokkaido Tourism Council, marketing and action plans, liaison with other regional tourism bureaus in Hokkaido, statistics and research. Tourism Development Group: Development and promotion of tourism products, service and events, human resources and education. International Tourism Group: Development of foreign market and promotion of attractive location for convention or congress. National Tourism Group: Development of domestic market by promotions In 2008, the Hokkaido Tourism Organization (HTO) was established as a corporate institution to materialize business support of Business to Business and Consumers (B2BC), operating Tourist Information Centres, distributing information as well as website operation management and marketing-promotion activities. The HTO employs 27 people and works as a delegated DMO of Hokkaido. They are an integrated membership union of the tourism service sector across Hokkaido. The total budget for 2009 was 691,439,000 Yen (approximately 5.7 million), of which 75% came from the Hokkaido Government and the remainder was provided by the members of tourism enterprises and sponsors (Source: the Bureau of Tourism of Hokkaido. Email to the author.15 Dec.2010). They bear the core function to carry the tourism action plan suggested by the Bureau of Tourism of Hokkaido into practice toward the market. The Hokkaido Tourism Council is an innovative party directly attached to the Hokkaido Governor s Office, consisting of fifteen experts from local economy, service and academic sectors to suggest the guidelines for tourism development and to supervise 13

its process and progress. As the following Figure 1 shows, the triangle network is wellconstructed in their operation management. Tourism Council (Supervisor) Bureau of Tourism (Management) Tourism Organization (Operation) Figure 1: Tourism Organization Structure in Hokkaido 2.3 Current Tourism Status in Hokkaido 2.3.1 Market Volume Let us examine Hokkaido more closely from the point of tourism trends. In the FY 2009, Hokkaido welcomed 46,820 thousand visitors (absolute number of visitors) [13]. The following Figure 2 and Table 1 show the trend in Hokkaido tourism. When reviewing the statistics, from 2004 onwards, it was clear that the visitors from Hokkaido (i.e. HokkaiDo landers), named as DO-landers, are the main source market. Around 85% of visitors are DO-landers, of which approximately 80% made a day trip, but didn t stay overnight. Naturally, visitors from outside Hokkaido, named Out-landers, including foreign visitors stayed overnight. By the peak of 2006, however, overnight visitors by Out-landers were shrinking. Hokkaido encounters the difficulty that day visitors dominate the market and overnight visitors are declining. 14

6000 5000 4000 3000 2000 OvernightVisitors DayVisitors 1000 0 2004 2005 2006 2007 2008 2009 Figure 2: Comparison with Day Visitors and Overnight Visitors in Hokkaido (Unit/ten thousand) Source: Bureau of Tourism, Department of Economic Affairs, Hokkaido Government, 2005-2010 [13] Table 1: Hokkaido Arrivals 2004-2009 and its Breakdown (Unit/ten thousand) FY Arrivals Breakdown Share Day Visitors Overnight Visitors 2009 Out-landers 597 12.8% 2 595 100% 0.3% 99.7% DO-landers 4,085 87.2% 3,326 759 100% 81.4% 18.6% TTL 4,682 100% 3,328 1,354 100% 71.1% 28.9% 2008 Out-landers 628 13.3% 2 626 100% 0.3% 99.7% DO-landers 4,097 86.7% 3,297 781 100% 80.8% 19.1% TTL 4,707 100% 3,299 1,407 100% 70,1% 29,9% 2007 Out-landers 649 13.1% 2 647 100% 0.3% 99.7% DO-landers 4,309 86.9% 3,532 777 100% 82% 18% TTL 4,958 100% 3,534 1,424 100% 71.3% 28.7% 2006 Out-landers 659 13.40% 2 657 100% 0.3% 99.7% 15

DO-landers 4,250 86.6% 3,393 857 100% 80.7% 19.3% TTL 4,909 100% 3,395 1,514 100% 69.2% 30.8% 2005 Out-landers 635 13.2% 2 633 100% 0.3% 99.7% DO-landers 4,178 86.8% 3,334 844 100% 79.8% 20.2% TTL 4,813 100% 3,336 1,477 100% 69.3% 30,7% 2004 Out-landers 632 13.1% 2 630 100% 0.3% 99.7% DO-landers 4,207 86.9% 3.346 861 100% 79.5% 20.5% TTL 4,839 100% 3,348 1,491 100% 69.2% 30.8% Source: Bureau of Tourism, Department of Economic Affairs, Hokkaido Government, 2005-2010 [13] The most popular destination to be visited in 2009 was the capital city Sapporo, followed by Otaru city and Asahikawa city. Table 2 shows that even these popular cities might not always benefit from bednights. Other unknown factors, which we will explore later, may be involved, however one major reason is probably due to the lack of availability of accommodation facilities in each city. Table 2: Top 7 Destinations in Hokkaido 2009 by Arrivals City Arrivals Total Thereof by Share Bednights Foreign Sapporo 13,014,000 9,483,000 649,210 6% Otaru 6,870,000 684,000 49,434 7% Asahikawa 6,365,000 660,000 37,911 5.7% Chitose 4,955,000 252,000 44,059 17% Hakodate 4,331,000 4,221,000 131,743 3% Kushiro 3,320,000 1,189,000 59,999 5% Noboribetsu 3,023,000 1,168,000 177,346 15% Source: Bureau of Tourism, Department of Economic Affairs, Hokkaido Government, 2010 [14] 16

2.3.2 Guest Mix in Hokkaido A studying of the figures from the past six years reveals that the total bednights in Hokkaido are decreasing after the peak of 2006. However, the foreign visitors still make up the same small proportion of the volume both in arrivals and bednights since 2007 (see Table 3). The number of foreign visitors has increased from 427,050 in 2004 to 675,350 in 2009 (+ 58.1%), but this makes up only 1.44% of total visitors in 2009. The Hokkaido market is extremely dominated by the domestic market, and other source markets are particularly Asian neighbouring countries such as Taiwan, Hong Kong, China, Korea, Singapore and Australia as Figure 3 shows, which is the same character as statistics of overall Japan. Russia, England, Germany and France are recorded in smaller amount than the others in Figure 3. It is in a critical condition that over the past six years the market share has been almost unchanged in proportion between domestic and foreign. This is not only due to the lack of direct flight service to/from New Chitose International Airport in Hokkaido. Table 3: Changes of Foreign Visitors 2004-2009 in Arrivals and Bednights 2004 2005 2006 2007 2008 2009 TTL Visitors 48,390,000 48,130,000 49,090,000 49,580,000 47,070,000 46,820,000 Thereof Foreign 427,050 513,650 590,650 710,950 689,150 675,350 Share% 0.88% 1.07% 1.20% 1.43% 1.46% 1.44% TTL Bednights 34,230,000 33,970,000 34,430,000 32,790,000 32,220,000 30,920,000 Thereof Foreign 1,343,152 1,631,178 1,766,650 2,109,681 2,088,309 1,979,431 Share% 3.92% 4.80% 5.13% 6.43% 6.48% 6.40% Source: Bureau of Tourism, Department of Economic Affairs, Hokkaido Government, 2005-2010 [13] 17

Malaysia Australia USA Thai Others Taiwan Singapore Korea HongKong China Figures 3: Guest Mix by Bednights 2009 Source: Bureau of Tourism, Department of Economic Affairs, Hokkaido Government, 2010 [14] The Accommodation Survey CY 2009 by MLIT and JTA reported [15] as the Table 4 that the total number of bednights by foreign visitors through 2009 reached 18.2 million. Tokyo leads the ranking of Japanese popular destinations in terms of total bednights and foreign tourist bednights, Hokkaido ranked 2 nd in total bednights but 3 rd in international bednights. These top three destinations had a share of over 50% of the total foreign bednights market. It is clear just how much Hokkaido contributed to inbound business. Table 4: Top 3 Japanese Destinations by Bednights 2009 (by province) Top 3 Destinations Total Bednights Thereof Foreign Share Tokyo 34,527,190 6,377,700 34.9% Osaka 15,707,030 1,966,500 10.7% Hokkaido* 24,564,640 1,806,740 9.9% Subtotal 74,798,860 10,223,631 55.5% Others 226,505,080 8,146,830 44.5% Grand Total 301,303,940 18,297,770 100% Source: Accommodation Survey 2009 by Japan Tourism Agency, Ministry of Land, Infrastructure, Transport and Tourism, 2010 * The figures were obtained prior to the incorporation of annual statistics on new and obsolete facilities, and shows slight changes from FY figures by Hokkaido Government 18

2.3.3 Seasonality Based on the bednights, Hokkaido welcomes tourists intensively in the summer season between July and September. Foreign tourists also visited more in July and August but their peak season is observed in winter as well between December and February (see Figure 4 and Appendix 1). It is characteristic of Hokkaido to hold two peak seasons in foreign markets. Dec Jan Feb Nov Oct Sep Mar Apr May Foreign Overall Aug Jul Jun Figure 4: Seasonality Comparison by Foreign and Overall Bednights 2009 Source: Bureau of Tourism, Department of Economic Affairs, Hokkaido Government, 2010 [13] 2.3.4 Demands by Foreign Visitors The Japan Tourism Agency (JTA) conducted a consumption trend survey among foreign visitors to Japan between April and June 2010 [16]. The HTO also conducted a survey between May 2007 and February 2008 [17]. These surveys examined travel trends and demands, which shall be helpful for comparing trends and to find potential segments for future tourism development in Japan and Hokkaido. According to this trend survey, the leisure tourists stayed in Japan around 7.6 days on average. The distinct fact was that Asian leisure tourists stayed for quite shorter periods for four to six days, while tourists from western countries stayed rather longer between seven to thirteen days. Particularly, the majority of German leisure tourists tended to stay more than seven days in Japan. 19

Hokkaido s foreign tourists stayed mostly between three to five days (64.5%). potential: Developing longer stay in Hokkaido and achieving 7 days stay. German and/or western tourists (Australia, USA and Russia) are new target markets. Leisure tourists from Asia to Japan are likely to accompany family members in participation both of group package tours and fully independent travellers (FIT). In contrast, western leisure tourists are likely to travel alone or accompany with a spouse or partner as a FIT. 60.4% of foreign visitors to Hokkaido travelled by package tour, while 39.6% were nonpackage travellers. potential: New targets are FIT from Asian and western countries. To the question Which source(s) were helpful in obtaining information about your destination prior to coming to Japan? in JTA s survey [16], internet (27.6%) was the greatest answer, followed by personal blogs (20.2%), word of mouth and recommendations from friends/family (20.2%), the guide books (19.2%), especially Lonely Planet (14.1%), tour catalogues from travel agents (16.3%), and websites of travel agents (15%). Among foreign visitors to Hokkaido, internet (39.3%) was the most important tool, followed by travel agents (31.7%), TV coverage (26.3%), magazines (23.4%), word of mouth (19.9%) and travel guide books (19.8%). potential: Internet and word of mouth are very important tools. Online information and blogs need to be developed. The most popular activities during a stay in Japan were eating Japanese food (93.6%), shopping (72.8%), city excursions (64.8%), nature and landscape (55.3%), staying in a Ryokan-Japanese style inn (50.7%) and hot springs (39.7%). More than half of the answers (54.2 %) answered that they would very much like to enjoy health spas/ hot springs on their next visit to Japan. The same answers (multiple answers possible) were observed among visitors to Hokkaido as well, however, the greatest answer was distributed quite equally between nature and 20

landscape (67.1%) and hot springs (60.6%), followed by shopping (49.6 %), city excursions (47.9%) and Hokkaido specialty/local cuisine (41.6 %). potential: The popular activities for the foreign visitors to Japan are also available in Hokkaido as well. Attractions and activities in Hokkaido shall attract foreign visitors and meet their expectations. Dynamic presentation of tourism activities in Hokkaido could be effective. 2.4 Comparison of Hokkaido Tourism Industry with Austria Austria is ahead of other countries in tourism and hospitality management. Tourism, especially lead by the capital city Vienna, is one of the largest and fastest growing industries in Austria and is significant to Austrian economy. The Statistics Austria, an Austrian statistic research institution, reported that direct tourism value added in 2008 amounted to 15.05 billion which corresponds to 5.3% GDP share [18]. According to another economic survey, the value added generated by tourism in Vienna in 2009 amounted to some 3.6 billion, it represents approximately 5% of Vienna s Gross Regional Product and more than 15% of tourist value added for the whole of Austria [19]. Tourism is an important source of tax revenue for state and local governments. Austrian National Tourist Office (ANTO), originally established 1945/46 to evaluate service quality of Austrian hotels and restaurants, was founded in 1955 to promote Austria as a sustainable travel destination abroad. ANTO is financially supported by the Austrian Federal Government by 75% and Austrian Chamber of Commerce by 25% (as of 2010) [20]. They are positioned as governmental DMO and a neutral organization in commercial business, although possibly acting as a fee-based marketing agent in respect to Austrian tourism interests. ANTO forms a kind of a hierarchical network (Werthner & Klein, 1999, P48) in tourism industry, they named it Alliance 10 consisting of nine other Austrian province tourist offices. It is a very practical formation that tourism resources and related raw materials from nine regions flow into ANTO, and products are shaped into the common Austrian brand label Holidays in Austria and distributed through several marketing channels, e.g. websites, internet, advertisements and brochures. 21

In the calendar year (CY) 2009, some 124.3 million bednights were reported in Austria, which made a drop of 1.9% compared to the previous year. The number of bednights by Austrian domestic tourists rose to 34.4 million by 1.7%, those by foreign visitors declined by 3.2% to 89.8 million. The total number of arrivals had a slight decrease by 0.9% to 32.3 million, while there was a decrease of 2.6% to 21.35 million among total foreign arrivals but arrivals by Austrians rose to 10.96 million by 2.6 (Source :TourMIS, see Appendix 2). Foreign visitors are significant source markets to Austria as comprising of a larger volume of arrivals and bednights. Vienna in CY 2009, recorded approximately 4.4 million arrivals and some 9.8 million bednights of which 7.9 million was attributed to foreign visitors (80%). The main source markets to Vienna are Germany (21%), Italy (6%), USA (5%), UK (4%), Spain (3%), France and Switzerland (3%), which reached about 42% of the total share but Austrian domestic tourists rated even higher at 2nd rank in its share by 20% (Source: TourMIS, see Appendix 3). With a comparison to Hokkaido, some findings are illustrated in the component of market share. As shown in Figure 5, the domestic market in Hokkaido is stronger by a huge margin than the foreign market, which is in complete reverse to Austria and Vienna. Although the domestic market is not monopolistic to Austria and Vienna, it maintains a higher favourable position in the share comparison as shown in Table 5. The market in Austria and Vienna is supported by a favourable source country with a certain degree of share in addition to the domestic market, i.e. Germany, whereas a similar loyal market besides the domestic in Hokkaido could not be found at all. 22

Hokkaido Vienna Foreign Domestic Austria 0% 20% 40% 60% 80% 100% Figure 5: Market Share Comparison in Bednights 2009 Source: TourMIS and Bureau of Tourism, Department of Economic Affairs, Hokkaido Government, 2010 Table 5: Top Source Markets 2009 in Austria, Vienna and Hokkaido (Bednights) Share Austria % Vienna % Hokkaido Germany 48,856,862 39.3 Germany 2,076,866 21.1 Japan 28,940,000 93.6 Austria 34,400,000 27.7 Austria 1,970,301 20.0 Taiwan 564,102 1.8 Netherlands 9,451,747 7.6 Italy 560,469 5.7 HongKong 436,155 1.4 UK 3,263,866 2.6 USA 507,905 5.2 China 240,184 0.8 Switzerland 3,641,860 2.9 UK 358,630 3.6 Korea 230,804 0.7 Italy 3,015,873 2.4 Spain 308,079 3.1 Singapore 144,577 0.5 Belgium 2,530,232 2.0 France 284,871 2.9 Australia 130,052 0.4 Czech 1,955,027 1.6 Switzerland 284,148 2.9 USA 45,205 0.1 Source: TourMIS and Bureau of Tourism, Department of Economic Affairs, Hokkaido Government [14], 2010 Share Share % These two illustrations reveal that Austria and Vienna attracted foreign tourists much more than Hokkaido. What attracts, inspires and motivates them to travel to Austria and Vienna? Can we presume it is due to relatively easy access within the European Union (EU) territory? Assuming it is, most of European metropolitans should be successful in tourism. It would be untrue in this case. Is it because of the organizational structure and its tourism marketing intelligence that Austria and Vienna have managed to pull so far ahead? Let us compare seasonality of foreign visitors bednights. The following Table 6 shows that Austria has two peak seasons in winter around February and in summer between July 23

and August as well as Hokkaido, while Vienna has welcomed foreign tourists mostly at the peak of summer season, however it seems that the foreign market to Vienna is regardless of the season. Table 6 shows that Hokkaido hold similar seasonality due to the similar tourism resources. Table 6: Seasonality Comparison of Monthly Bednights 2009 by Foreign 2009 Hokkaido * Vienna Austria January 229,931 449,979 11,475,124 February 343,797 389,723 12,862,618 March 132,171 546,492 8,500,931 April 83,790 690,614 5,410,477 May 97,168 782,637 3,675,776 June 83,334 709,333 5,661,040 July 189,324 865,221 10,324,189 August 193,470 957,935 11,921,100 September 98,388 829,790 6,475,088 October 144,290 775,827 3,749,042 November 110,700 534,647 1,803,164 December 273,068 762,849 8,005,615 Total 1,979,431 8,295,047 89,864,164 Source: TourMIS (as of 24 March, 2011), Bureau of Tourism, Department of Economic Affairs, Hokkaido Government, 2010 [13]. *FY2009 The budget for the Vienna Tourist Board (VTB) in 2009 was 23.7 million, of which 47% came from the local accommodation tax under the City Tourism Act, 22% from the Vienna City Government and the rest came from the Vienna Chamber of Commerce and sponsors [19]. VTB s budget and its employees are four times that of Hokkaido, which may reflect that the turnover that bednights by foreign visitors in Hokkaido is one forth of those of Vienna. Austria has ten times the scale in organizational structure, in budget and numbers of employees than Hokkaido. However, the difference in productivity is exceeded considerably more than ten times (see Table 7). 24

Table 7: Comparison of Organizational Structure (as of 2009) ANTO VTB HTO Budget 2009 52 mil 23.7 mil 691,439,000 5.7 mil 75%: 47%: 75%: Austrian Government Accommodation Tax Hokkaido Government 25%: 22%: Others: Austrian Chamber City Government of Commerce Memberships, Sponsors Others: Vienna Chamber of Commerce, Sponsors Employees 230 106 27 Arrivals by foreign 21,355,439 3,349,738 *675,350 Bednights by foreign 89,864,164 7,872,526 *1,979,431 Source: ANTO, VTB, Bureau of Tourism-Department of Economic Affairs, Hokkaido Government * FY How about the hardware in the Hokkaido tourism system? Is their infrastructure designed well to accommodate foreign tourists? Let us further examine their competence in the tourist infrastructure. In Austria 67,166 accommodations are counted and they provided in total 1,087,370 beds in 2009. Thereof, 13,600 hotels (around 20%) have been categorized by star standard [21]. In Hokkaido, 4,952 establishments accommodate 327,471 beds [22]. Worldwide hotel chains hold star standard due to their global alliance, however, there is no specific classification standard such as a star standard for accommodations in Japan. Normally Japanese accommodations, especially in local cities, are classified by the facility category. In Hokkaido 668 hotels, 2,788 Ryokan-Japanese style inns and 1,496 lodging houses are registered [22]. 25

Table 8: Accommodations Comparison 2009 Austria Hokkaido Population (a) 8,281,295 5,600,000 No. of establishments 67,166 4,952 Category 5-4 star 2,400 Hotel 668 3 star 5,500 Ryokan 2,788 2-1star 5,700 Lodging 1,496 Subtotal of Hotel category (13,600) (4,952) Other establishments 53,566 - Total supplied beds (b) 1,087,370 327,471 Total no. of bednights (c) 124,307,317 30,921,700 Ratio (c/b) 114.3 94.4 Travel intensity (c/a) 15.0 5.5 Source: Statistics Austria, Bureau of Tourism, Department of Economic Affairs, Hokkaido Government, 2010 The ratio is simply calculated to divide the total number of bednights by total supplied beds. Austria had 1.2 times that of Hokkaido. Travel intensity can be used to measure competitiveness in tourism, dividing total number of bednights by population. Austria is 3 times stronger than Hokkaido. Even though Hokkaido has the same land area as Austria, it would be preposterous for a region to be compared directly with a country. However, we use Austria for simple reference to measure infrastructure level of Hokkaido tourism. Compared to Tokyo, there are not so many worldwide chain hotels in Hokkaido. When looking for accommodation in Hokkaido, consumers cannot ensure the quality of service without some kind of standard, e.g. star standard, which offers less information from supply side. The transportation system in Austria is highly developed and efficient for public convenience. The rail provider in Austria is Austrian Federal Railways (ÖBB), which has an extensive countrywide network. ÖBB operates a length of 6,600km and employs 42,893 people [23]. Most tourist places are easily reached by bus as well. ÖBB-Postbus operates around 22,000 routes [24] and is supplemented to reach local destinations which the train network fails to cover. In addition to their schedule service, excursions to scenic regions or sites are available. Travelling by train is generally fast and convenient but is 26

quite a bit more expensive than travelling by bus. Thus, the bus is a better option moneywise and for exploring the beautiful landscapes. Most of Austrian s metropolises have integrated public transportation system with the national modes including trains, trams, buses and/or subways, offering several discount tickets to tourists and residents as well, some of which allow free transfers between all available modes on a given day or period within the specific zone. Six province capital cities such as Vienna, Salzburg, Linz, Innsbruck, Graz and Klagenfurt have their own airports. Domestic flights are not so common means of transportation in Austria, but there are frequent connections between Vienna and other Austrian cities. Austrian Airlines serves all of these cities, and nowadays low cost carriers have entered the Austrian market too. Compared to Austria, Hokkaido has a less organized traffic network. Metro lines are only available in the capital city Sapporo, and only operated by the Sapporo City Government. Railway is fairly developed and a popular mode of travel, but many cities are still accessible only by roads. Japan Railways Hokkaido Company (JR) is the only railway provider, serving approximately 2,500 km on fourteen routes across Hokkaido [25]. The train network is more than adequate for travel between major cities. The two major bus companies undertake most of the bus network in Hokkaido. Hokkaido Chuo Bus operates a total of 278 routes [26] within the capital city Sapporo region and between Sapporo and other major cities by express service. JR Hokkaido Bus, a subsidiary of JR provides regional and long distance services, supplementing the railway network. Furthermore there are enormous numbers of bus operators in local regions. These services are not incorporated systematically. Although the bus is a cheaper but slower optional means, which covers the unexplored and inaccessible places by train, many local bus suppliers run independently in Hokkaido, which makes its usability somewhat of a problem for travellers. Nine of the thirteen airports in Hokkaido have direct service to Tokyo and other major domestic metropolises. Due to the vast size of the land, Hokkaido has relatively welldeveloped commuter airline networks. 27

Table 9: Comparison of Transport Infrastructure between Austria and Hokkaido Austria Hokkaido Area 83,859km2 78,000km2 No. of Airports 6 13 Railway Provider ÖBB JR Hokkaido Area of Service 6,600km 2,500km Chuo Bus, JR Bus, Bus Providers Postbus: and many locals: countrywide operation urban and local operators Network System integrated not integrated Source: ÖBB, ÖBB-Postbus, JR Hokkaido, Hokkaido Chuo Bus Tourist demand does not flow into a single transportation mode. Increasing diversity of travel types and preferences by consumers calls for many available modes for selection and utilization in the destination. A transportation network is essential for both the local community as a quality of life and for tourists as a utility of service toward customer satisfaction in the place. Simply judging from the figures of operating lines against the land area, Austrian track covers 2.5 times more than Hokkaido. In Hokkaido, there are many traffic operators in each mode and each region, whose services are not integrated at all, as Austria does. Unfortunately, all official websites of bus operators in Hokkaido are available only in Japanese, while only JR offers information in English and other Asian languages. This could cause a bottleneck and confusion for potential tourists or stop them planning travel to Hokkaido at the early step of information searching. Transportation infrastructure should be improved in consideration with tourism development. According to ANTO, 198 incoming agencies are registered in all provinces across Austria [27]. 259 travel agents are counted in Hokkaido [22], however the number of incoming agencies is unconfirmed by HTO and by the Japan National Tourist Organization (JNTO). JNTO is an independent administrative organization under the Japan Tourism Agency (JTA) to promote inbound travellers to Japan, engaged in a diverse range of inbound tourism promotions overseas, marketing and promotion of international conventions and support for foreign tourists through Tourist Information Centres. In their official website (http://www.jnto.go.jp), 26 incoming travel agencies (one has already discontinued) are listed just as JNTO s supporting members [28]. Let us look further into the overall Japanese inbound market. 28

In FY2009, JTA reported that the annual turnover by the leading 62 Japanese travel agencies reached 5,540 billion Yen, thereof 52 billion Yen of inbound business were accounted by 38 travel agencies [29]. Although SME incoming agencies are excluded from this report, these 38 travel agencies are quite similar to the JNTO s supporting members. The difference in number between 26 and 38 is caused by the way the JTB group companies, one of the mega travel agents in Japan, are counted. In JNTO s list, JTB is counted as one, while 14 JTB group companies run by a self-accounting system are listed independently in JTA s turnover list. In any case, the number of incoming agencies in Japan is approximately 38, it is quite a bit smaller than that of Austria. Based on the annual turnover report as in Table 10, inbound business in Japan has reached only one percent of the whole. This result clearly indicates that smaller inbound business is related to a lower level of industrial infrastructure in Japan and Hokkaido. Table 10: Turnover by Japanese Leading Travel Agencies and Size of Tourism FY 2009 FY 2008 Overseas travel turnover 1,954,169,770 35% 2,421,349,432 Inbound turnover 52,225,441 1% 62,057,630 Domestic travel turnover 3,533,888,285 64% 3,954,239,101 Total (unit in thousand Yen) 5,540,283,495 100% 6,437,646,163 No. of Travel Agencies Approx. 38 Approx. 38 No. of Foreign Tourists in Japan 6,789,658 100% 8,350,853 No. of Foreign Tourists in Hokkaido 675,350 10% 689,150 Source: Japan Travel Agency, Ministry of Land, Infrastructure, Transport and Tourism, 2010 Before planning and implementing strategies or policies to become an international tourism nation, it has been suggested that Japan and its regional destinations need to invest and develop the industrial infrastructure for welcoming foreign tourists. With this finding in mind, let us review key factors contributing to successful tourism development, apply these to the Hokkaido tourism industry and examine what components are missing. 29

3. Key Factors for Successful Tourism Tourism is a very complex industry. Therefore defining tourism is quite difficult. It is not an industry that is represented by a single product or service within the Standard Industrial Classification (SIC). Most definitions of tourism refer to the services and products such as hotels, restaurants or attractions provided to tourists, however these are not the only components of the tourism industry. Many other internal and external factors, many enterprises from small, medium, to mega scale, and many organizations are involved in getting tourism to function systematically. The more that these parties communicate with each other, the more sustainable an area would become. Tourism needs to be dealt with interrelationships among the market place. 3.1 Internal Factors Tourism products are supplied in the market place and consumed there by visitors. There are two main drivers: demand and supply in the industry. Consumers are rich in information resources but they always look for the proper information on products or services, availability, price and how and where to buy it. The supply side shall identify customers needs and its market segments, and create the respective products with the right features and prices (Werthner and Klein, 1999, P7) in balance with supply and demand. How much the destination is able to meet such demands is the true key for tourism business development. It should be noticed, however, that market trends and demands continue to change. The gaps in mismatching demands and supplies may cause an involuntary bottleneck unless any marketing activities were bridged. 3.1.1 Supply and Demand Tourism products cannot be easily tested in advance like other commodities, and many internal and external factors interact in the market place. Therefore forecasting of travel demands and trends is difficult and complex. Before being counted in the market, firstly the consumers need to be motivated to travel with personal interests, finances, time and physical ability. Secondly, many external factors such as diversity of destinations, foreign exchange rates, recession, epidemics or natural disaster would influence a traveller s 30

motivation. To understand the current travel trends, time series studies in combination with multivariable approaches are conducted by tourism organizations. The output shows the current trend of tourists in the market and the improvements which should be undertaken for further development. Understanding the consumer from the demand side leads to a knowledge of potential tourist groups for the destination. That outputs could be refined more by demographic attributes like age, occupation, education, income or family size, which helps defining potential market segments and examining how to tailor service products to the market audience. Tourist places and event attractions based on natural and cultural resources are the greatest components in the supply side, which could be the true travel products for providing physical and mental experiences of travel to tourists. However, not every tourism resource would become tourist attractions in the destination immediately. It should be designed as a product for tourists and managed for operation to be ready for accepting tourists. Moreover, it may be combined with other amenities and services in order to increase the quality of service. So that products and services from resources can meet demands and stimulate consumers interests in travel. Hotels, restaurants, travel agencies, transportation and airlines provide specific service products. Such service businesses augment the industry and make an enormous impact on the economy in the destination. The business transactions are not only with tourists but also benefit the local market. As mentioned, tourism products consist of natural and cultural resources but both could be developed to complement one another and be presented together in a comprehensive product line with respect to the consumers demands. Transportation is an important vehicle for connecting services and attractions in the destination. When a visitor first arrives, being confronted with several modes of transportation from many different companies can be stressful and confusing. An intermodal service, a free pass and signboards for easy access should be offered. The Vienna Card offers great benefits for visitors to Vienna, which allows tourists unlimited free travel for 72 hours on the underground, buses and trams around Vienna region in payment for 18.50 Euros and gives additional discounts on many attraction sights, restaurants, cafés and shops. 31

Promotion is an effective marketing activity for achieving tourism success as well as marketing research, which is highly dependent on customer needs and setting potential customer targets through market research. This would be a platform where the audience can easily access and obtain valuable package of services or products (Kotler et al., 2003, P5). It is used to encourage potential customers to enter into the market place. Throughout the marketing promotion, attractions and activities from the local resources facilitate the creation of images and values of the destination and promises what visitors can experience in the place. Promotion is directed toward the demand side before travel decisions are made whereas information is needed both before and during travel (Grunn, 2002, P56). Tourism is an information business due to structural reasons (Schertler, 1995; Werthner and Klein, 1999, P8). The motivated tourists look for information for decision making. However, information on the destination and service products from the supply side are mostly descriptions and abstract models. For assuring the quality of products, tourists have to overcome the risk distance between decision making and consumption by collecting as much useful information as possible. The most important point here is that both demand and supply sides need information. Information about service products will be delivered to consumers from the supply side, and information about customers demands flows back to the supply side. The information each supplier provides adds values to the product, so that consumers would find it easier to make decisions and assure the value of the product with a certain expectation. The more frequently the communication network flows in the supply chain, the more suppliers can be engaged in the supply chain and meet market trends as Figure 6. 32

Demand Supply Activities Attractions Amenities Transportation Information Promotion Figure 6: Tourism System (revised Grunn s figure, 2002) Source: Grunn, C.A. and Var, T. Tourism Planning. P34. Tourism organizations and DMOs have to deliver aggregated information with a favourable destination image to the market using internal and external frequent communication networks and channels. Due to the consumers fast changing behaviours, distribution of information is time critical under global competition. The information on the destination should not be static, should be updated according to market demand and availability. A frequent flow of communication helps DMOs not only to get the market overview on travel trends of tourists, resource utilization and statistical data but also to improve the flow of communication with consumers. Recently, the greatest change in consumer behaviour is how to search for information. The internet is mostly used for searching for information and product comparison, which avoids the risk of mismatching between quality of service and information. Traditional information will be replaced by electronic information. How much the destination employs the electronic information system could be a factor to measure of competence in the tourism. We will discuss this further later on this thesis. 33

3.2 External Factors Natural and Cultural Resources: The development of the supply side is influenced by several external factors. Natural resources identify the unique attributes of the place, and these are very important objectives for tourists to visit. A popular destination is also abundant with cultural resources. Tourists have become more sophisticated through being more educated and having many experiences of overseas travels. So tourists have interests in the history and historical places of the destination. Sites of ancient history often have their own ethnic lifestyle and culture such as art, music, food, drinks and custom. These aspects would bring some authentic excitement of travel to experience a different time and place. Natural and cultural resources are a foundation of tourism attractions and activities on the supply side. In any event, the greatest business success depends on resources and their preservation within the destination. Climate and weather play an important role in the popularity of a destination. As a recent trend, eco tourism, green tourism and UNESCO World Heritage sites are in demand as travel purposes because tourists are increasing awareness of preservation of the natural resources and climate changes. Entrepreneurship and Finance: For the development of tourism, financial support and entrepreneurs are required for both public and private sectors because many small and medium enterprises (SME) are involved in the supply chain. Adequate capital or funding, investment in infrastructure and a marketing budget supported by regional governments or official organizations are primarily needed for tourism development and sustainable tourism competence. Labour: Tourism generates employment, business opportunities and benefits for the local community. Tourism is a people related business i.e. the hospitality business, the human resources management is indispensable, which also contributes to maximizing profit. Service quality management is important for attaining a competitive advantage in the market. The higher the market demand level of service, the more trained labour is required. 34

Governmental Policy and Leadership: Governmental policy and regulations influence the way a tourism system works and accounts for the quality of tourism development. For example, to keep up with mass mobility by coach in the destination, infrastructure needs to be managed and maintained by supportive governmental policy. Leadership is incumbent on official tourism organizations to carry out objectives more successfully in tourism development. Others: It should be noticed that some external factors such as the diversity of destinations, geographical and climate changes, foreign exchange rates and recessions, and epidemics could cause a decrease of demand. 3.3 Case Study of Market Researches by Vienna and Hokkaido The Vienna Tourist Board (VTB) made a survey to analyse the market trend in 2009 [30]. Vienna has been establishing the strong brand image as an international leading tourism destination. Their attributes as a city of music, history and culture have been attracting people worldwide for a long time. However, VTB saw a need to clarify what was lacking in what they had to offer to those who chose not to travel to Vienna. They succeeded with the very interesting finding in the research that Vienna is considered to be a once in a lifetime destination by most of the sample overseas interviewees. Although it shows that Vienna is viewed positively in image, it has the negative result of putting people off travelling to Vienna until someday. This gap caused a challenge for Vienna to appeal to people more directly and to reposition Vienna from a timeless destination to a now destination. Right afterwards, VTB replaced their slogan Vienna waits for you with Now or Never. Their research was conducted with a focus entirely on understanding the destination Vienna and identifying the most important elements of image attributes in Vienna through consumers perceptions. After the data collection, the best five attributes: 1) Imperial heritage, 2) Music and culture, 3) Enjoyment of food culture, 4) Superb city infrastructure and 5) City/Green space balance are listed in a framework, each is connected with Viennese representative products or services for ensuring their brand image. Addressing attributes of uniqueness and differentiation is important for 35

preserving the value. Oppositely, it is necessary to classify the tourist perception of a place. This marketing process of matching both sides represents a practical model that the tourism organization should be conscious of market trend and cooperation with suppliers for the supply side of development because they have the closest link to the consumer side non-commercially on behalf of all suppliers. The Hokkaido Tourism Organization (HTO) conducted online marketing research from December 2008 to February 2009 on the domestic market in three metropolitan areas in Tokyo, Nagoya and Osaka [31]. It reported that the greatest motivation for planning travel in general was financial ability followed by interests in beautiful natural landscapes, food and health spas. 76.5% of the sample answered that the internet was the most useful tool for searching travel information. The attributes they believe Hokkaido has to offer are abundant natural resources, delicious food, hot springs, ski resorts and shopping. It seems there is no gap between the supply and demand sides so far. However, whopping 42.9% had no reason for not wishing to visit Hokkaido ever, followed by higher cost in travel (38.5%): especially for the youth and young family travellers with children, and cold weather (17.8%): especially for the elderly, and inconvenient transportation (17.1%). The customer satisfaction level in natural resources and food was very high, although still relatively low in expectation level, price level and transportation system. HTO concluded this research report as follows: Our big three attributes (nature, food, health spas) are firmly established in the market. New product development from resources is needed to further motivate consumers to travel to Hokkaido. To accomplish this, we should improve the quality of human resources and its establishment of networks. To increase tourism revenue from sales products and services, products in the low season need to be developed and targeted towards the independent traveller and the senior generation. Even the HTO succeeded in understanding the market trend from this research as the VTB did, their review did not criticize the internal negative factors on the supply side. The research revealed that motivation, price and transportation are obstacles to the 36

demand side. In the tourism product development, at first, consumers defines quality by the quality level of expecting experience, then compares the cost against the quality level of the expectation. Service quality and the price are crucial in tourism management because these decide the tourists satisfaction level in the destination. Although Hokkaido supplies correct attributes to the market trend, authenticity or differentiation may not be perceived correctly by consumers. The people who answered "Nothing in particular not to visit to Hokkaido might be satisfied with a similar destination as Hokkaido. Where the HTO failed to find a solution for bridging the gap between products and customer s perceptions, the VTB s survey succeeded. It is an indispensable step for the DMO to ensure the major attributes and to preserve the authentic values. These viewpoints would shed light on why Hokkaido s performance has unfavourable results recently. 3.4 SWOT Analysis of Hokkaido Tourism Recalling the identified facts in industrial analysis, let us make a SWOT analysis to illustrate the internal performance and resources of the Hokkaido tourism as well as potentials against threats and opportunities. Strengths: 1) Advantageous climate of four distinct seasons 2) The attributes such as superb nature and urban surroundings, historical places/ buildings, beautiful meadow/landscapes, ski resorts, hot springs, and food meet tourist demand. 3) New Chitose International Airport and its frequent flights from Tokyo and other major domestic cities. 4) Higher international awareness as a leisure destination 5) Indigenous history and culture of the Ainu 6) UNESCO world heritage 7) Sapporo was a winter Olympic game host city 37

Weaknesses: 1) Infrastructure of transportation, accommodation, incoming agencies 2) Same day visitors account for 70%. 3) Source markets depend on domestic and Asian neighbouring countries 4) Few FIT 5) High cost in travel 6) Service quality Opportunities: 1) Increasing foreign tourists to Japan 2) Nature and well-being oriented as a leisure purpose 3) Tourism Nation Promotion Basic Law and Visit Japan Campaign by Japanese Government 4) Inauguration of high speed railway Shinkansen, direct access to Japanese mainland (projected to be running in 2015) 5) Internationalization of Tokyo Haneda Airport from October 2010 6) High internet usability and social media for travel information searches Threats: 1) Global competition in tourism (domestic and international) 2) Decreasing overnight visitors in Hokkaido 3) Currency exchange rates, global recession, epidemic, and natural disaster 4) Declining population and number of children, and higher aging ratio 5) Shrinking of key local industry 6) Consumers trust given information through C2C more than the industry s The evaluation process using strengths or weaknesses to take advantage of opportunities or to avoid threats indicates changes in the marketing directions and potentials for developing plans and improving performance. Where is Hokkaido now? Strength no. 2) x Opportunity no. 3) x Threat no.4) and 5): To avoid demographic threats in Hokkaido and to find a way to sustain global competition, tourism could be a dynamic leading industry. Hokkaido s attributes meet expectations by 38

foreign visitors to Japan. The tourism nation promotion basic law would support the creation of a local revitalization platform on which local tourism resources cluster. Where does Hokkaido want to go? Weakness no. 4) x Opportunity no. 1) x Threat no. 2): To achieve the tourism objective, developing the foreign market, especially FIT, is essential, which would avoid threat no. 2, the decreasing of overnight visitors to Hokkaido. How does Hokkaido get there? I. Opportunity no. 1) x Weakness no. 1), 5) and 6): To welcome more foreign tourists, infrastructure in transportation, accommodation and incoming agencies, the price, and service quality should be leveraged with the national governmental policy. II. Strength no. 3) x Weakness no. 3) and 4) x Opportunity no. 5) x Threat no. 2): FIT is a new target segment. Taking advantage of convenient access from Tokyo and other domestic cities to Hokkaido, FIT from Europe, Northern America and Australia who prefer to stay longer in a destination are eligible for a new market segment. III. Strength no. 2) x Opportunity no. 2) and 6) x Threat no. 6): Information should be accurate, timely and unbiased. The quality and quantity of information on official websites should be improved. With the FIT segment, nature and well-being oriented travellers in mind, some model plans, ideas for longer stay, and building communication, e.g. blogs should be provided across the official destination website. 39

4. Performance Level of e-tourism 4.1 The Role of Information and the Internet in Tourism From the above stated comparisons, it is predicted that poor marketing management on the consumer side would create another bottleneck to Hokkaido. Austria and Vienna seem to be conscious of consumer trends and attentive to improving customer relationships. This is the significant capability to have in order to foster their competence as a global market player. Online communication has to flow frequently between the supply and demand sides, within each side, and across the market place. It is no exaggeration to say that tourism is impossible without the internet. An online survey of 1,506 German internet users conducted by Yahoo in 2010 reported that 78% of survey participants answered that they purchased their last journey online [32]. Over 90% of respondents went to the internet first to search for travel related information. Search engines were used as the first source (75%), while traditional mediums such as catalogues, brochures (62%) and travel agents (55%) were supplements. The increasing capability of computers, increasing number of computer users and their degree of e-travel experiences could be considered to be pulling factors in this event. The internet accelerates the interaction between suppliers and consumers. In order to formulate timely response to consumers demands, the tourism business has to go electronic. A lot of enterprises can find business opportunities to reach a potential market with the introduction of the internet. The internet as be used not only as a marketing channel, but also a means of communication between suppliers and customers. Maintaining an effective website has become a key element in strengthening customer relationships and gaining a global or segmented market. Philip Kotler quoted from Henry Hartveldt of Forrester Research (2003, P499) three important advantages why consumers go to e- business. Increasing efficiency: possible to use at anytime and anywhere Varied information: possible to obtain information about travel and its destination Reducing cost: possible to compare prices and get lower price 40

Therefore, for the product suppliers the website has become one of the most important and convenient means of marketing to introduce the content, uniqueness, and differentiation of the product. Nowadays, the main reasoning behind an enterprises use of a website is focused on increasing awareness of the products, selling the products, supporting promotional campaigns of a brand or products, maintaining the communication channel with consumers, and collecting customer feedback and profiles. Though any enterprise pushes the product to the market all over the world on the internet, a comprehensive management technique is required to be successful in e-business. Nevertheless, not all consumers benefit from e-business. Werthner and Klein (1999, P22) showed the relationship between knowledge of the consumer and complexity of the product as the Figure 7. Knowledge of Consumer low Need of assistance high Direct access low high Figure 7: Knowledge of Consumer vs. Complexity of the Product Source: Werthner, H. and Klein, S. Information Technology and Tourism. P22. Complexity of Product Lower product complexity but higher consumer s knowledge is well-suited to online services because simple and general products give consumers direct and easy online access for purchase. Online flight reservations by business travellers perfectly illustrate this. In the opposite case where the product has higher complexity and the consumer s knowledge is low, consumer needs assistant information in addition to general information. This is the typical case of tourism. Tourists have an interest in travelling or in a destination and can find a lot of information but find making a decision difficult 41

because tourism products and services are so diverse and complex, and not as simple as a commodity. Collected online information is aligned with traditional mediums to compare products and prices, to ensure the product quality and to avoid the risk of mismatching in quality and price. 4.1.1 Social Media in Tourism Meanwhile social media are going to be a more relevant information source for travellers. Interconnectivity with friends, families or people who have common interests plays an online word to mouth role. So far today, travellers have used the internet to plan a trip, to get to know the destination, and to read recommendations by experts from the destination. Presently, travellers are well-educated, experienced, active in searching and collecting information, and are convinced of what they want to do during their journey. Such independent travellers are not satisfied with passive supplier-driven travel information in any medium. As a consequence, consumers are tending to be suspicious of such prettified information and have started using other tools to search for demand-driven information. Social media networks invite such consumers to share their opinions and encourage them to find the real story closer to the truth. In the present social media networks, any consumer could be an information source and an editor of the community site, and feel free to talk about what they are going to do, free to hear from others who have done the same thing, and free to share advice or opinions. Such information on social media is rather excluded from traditional destination websites or travel agents, however it constitute a substantial part of information search results. Consumers can let the organizer know their opinions on the organizer owned website, at the same time they can inform fellows opinions or feedback over the products. Such transactions of C2B and C2C interconnect in the information system, and C2C discussion forums about travel or destinations, such as Facebook, Twitter, Wiki travel, Trip advisor, and blogs have been attached to the websites of travel suppliers recently. Social media has changed the tourism landscape in searching for information as shown in Table 11. 42

Table 11: Comparison of Interaction Presence between Traditional Website and Social Media Traditional Website Visit the official destination website Passive, time lag information Supplier-driven Objective One to one No share of information with others Plan a trip Book a hotel Find events Get to know the destination One way or bilateral communication line No one can publish information to others News about the destination Look at promotional photos and images Watch promotion videos Social Media Visit social media sites about the trip Active, timely information Demand-driven Personal One to mass in a community Share of information with others Plan a trip Book a hotel Find events Get to know the reputation, feedback of the destination Multiple communication lines Anyone can publish information to others News from the destination Look at lively photos Watch diverse videos Wiki travel (http://wikitravel.org) is a user-oriented travel guide to worldwide destinations and very popular for primary travel planning. It covers things to do, to see and to buy, events, hotels, food and safety information as well. Consumers use it with Wikipedia to get general information on a destination. Gadling (http://www.gadling.com) is a part of AOL (former American Online), a weblog about global travel destinations and entertainment, which is becoming more popular in the US and worldwide as a social network. This covers interesting articles from general travel information to travel tips and technique, from budget to adventure travel. Concierge (http://www.concierge.com) is a unique social media. It was established by the international travel magazine publisher Condé Nast Traveller based in UK, whose motto is Truth in Travel. Its digital magazine can be found on the Concierge website. Every year the magazine rates destinations and tourism facilities such as hotels and airlines. The editors of this magazine do not accept complimentary travel generally, so that they are independent and fair in ratings. They have good and bad experiences just like other travellers, and their reports and recommendations are transparent and authoritative to interested consumers. Both sides can communicate actively with a common interest, and consumers can get reliable truth in travel from fellow-travellers. 43

Lonely Planet which is based in Australia, is the largest international travel guidebook and media publisher. As of 2010, they published 500 guidebooks in 8 languages as well as TV programs, magazines and websites [33]. They have launched a travel community Thorn tree at http://thorntree.lonelyplanet.com on their own website. It is a web based travel forum where participants can feel free to post opinions and trade tips or experiences. Characteristic of this social media is that to ensure the reliability of exchanging information through the community, Lonely Planet has provided community ethical guidelines where they encourage users to contribute actively but to be civilized in a sincere and legal manner to fellow-travellers. The online travel market has expanded. Yahoo s 2010 survey in Germany also reported that 70% of the respondents answered that accurate content is important, and social media sites are the top relevant information source for online booking [32]. This result is also related to the fact previously discussed in the early chapter (3.1.1Supply and Demand). For foreign visitors to Japan, the internet, personal blogs and word of mouth were the greatest mediums for attaining helpful information prior to coming to Japan. Personal blogs were not observed among foreign visitors to Hokkaido. It is relevant that most of the foreign visitors who came to Hokkaido travelled there as part of a package tour, not FIT. Assistant information is not so necessary for group travellers because their travel agents can play the role of social media as their information source. Although it is understandable the personal blogs were not listed in Hokkaido s survey, it is quite easy to infer that information on Hokkaido may not be frequently talked about in social media. We examine this topic further in later chapter. Personal blogs are one of the helpful information sources not only to foreign visitors to Japan but also to worldwide travellers. Now an interest arises in how many personal blogs about Japan are tourism related. Japan Blog List is available online at http://www.japanbloglist.com, offering 253 blogs (of which 21 are no longer updated), which is a helpful list for interested persons in all things on Japan. These blogs are all written in English or other foreign languages (see Table 12). 44

Table 12: Number of Blogs in the Japan Blog List Number of blogs % Foreigners living in Japan Japanese living in Japan Japanese living outside Japan Japan related Other languages Foreigners living outside Japan Blog themes Personal journal 146 63% 122 4 20 Lifestyle, Culture, People, Travel 29 13% 1 2 24 2 Entertainment 14 6% 14 Social, Economy, Politics 12 5% 1 11 Education, Language 11 5% 1 10 Internet, Computer, IT 6 3% 1 5 Art 4 2% 1 3 Food 3 1% 1 2 Shopping 3 1% 1 2 Fashion 2 1% 2 Health 1 0% 1 Sports 1 0% 1 Total 232 100% 122 10 3 75 2 20 Source: Japan Blog List (as of 03 January 2011) The most popular theme of a blog is a personal journal style mostly written by foreigners living in Japan, these bloggers are talking about what they are going to do or have experienced in Japan. This is the most live and local news from the place where the bloggers live. The second popular blog theme is related to the Japanese lifestyle, culture, people and travel to Japan or a certain destination. These top two themes are relatively similar to leisure purposes and inspire holidays to the place. This simple research showed that personal blogs make many themes, travel in particular, interesting in such a way as to motivate the audience to travel. Indeed, social media continues to be embedded in tourism. Many businesses in tourism see social media as a new communication tool with the consumer market and start employing Facebook, Twitter or Trip advisor on their own website. This application has both of advantages and disadvantages for the business. In a short term it might be a buzz, however, in a long term it would be a great chance to increase the good reputation and loyalty among customers. A customer who had a favourable experience from the service 45

product tells the good news to others; it works as an online word of mouth. Contrarily, even one or more negative online feedback would disturb business. However, this could be seen as both a challenge and an opportunity for the company; challenge to fix the problem, an opportunity to improve service and potentially gain more customers as a result. Social media applications on their own website should not just follow the fashion of the IT trend but they should also demonstrate to consumers that the company is serious about the service quality management. What we need to emphasize here is that the social media has become an important medium for both travellers and suppliers. How accurately recommendations from online information from the suppliers matches their reputation from the social community is another critical issue for the tourism industry. To minimize the gap in quality and to shorten distance from the consumer side, ANTO has set up a blog platform at http://treasure.austria.info as an attachment under their official website. Staff members of ANTO write journals through their recent travel experiences in Austria. It invites a communication platform to share local information with potential visitors and also with bloggers, in which visitors can find hidden travel tips and can be inspired by their travel to Austria. ANTO stays closer to the demand side and enjoys its community. Such comprehensive information makes it easier for consumers to ensure that their expectations about quality and service of a product in Austria are met. Most companies have set up their own website presenting themselves. WWW is a really global but very competitive medium. A voluntary approach with the consumer side dealing with social media would help to shorten the physical distance between suppliers and consumers. Not being conscious of consumers expectations in their own website may lead to immediate failure of competence in business. It is highly recommended that Hokkaido takes this topic into serious consideration, especially if it wishes to identify the target market, i.e. foreign FIT and attract more of them in the near future. Assuming that frequent communications via travel blogs or social travel sites must be one of the criteria for measuring competitive marketing, where do Austria, Vienna and Hokkaido stand? 46

4.1.2 WWW Presence in Tourism To evaluate a destinations competence, let us examine the website presence with some empirical research with a comparison between Hokkaido/Otaru and Austria/Vienna. Phase I: Keywords Search by Google Google is estimated to have indexed eight billion pages (Sullivan, 2004; Wöber, 2010) and is used by 67.5% of worldwide searches [34]. Research customers who have not yet decided on a travel destination may have no particular keyword in mind and are likely to use a set of keywords such as tourism, tourist, travel or trip combined with the name of a destination or country at the primary research stage. Google search is a helpful instrument for observing how many information resource sites are available. In order to observe the number of available resource websites, we use the Google search engine as demonstrated in Figure 8 and 9. It is expected that the results of the first empirical research in ten different languages, using paired keywords, measure the attractiveness of a destination in the market. Using keywords: Austria tourism or tourist or travel or trip Vienna tourism or tourist or travel or trip Hokkaido tourism or tourist or travel or trip Otaru tourism or tourist or travel or trip 47

Figure 8: Screen Shot of Google Search Setting Figure 9: Screen Shot of Google Search Results As shown in Table 13, the number of URLs of Otaru is far greater than that of Hokkaido in Germany and Spanish. The reason for this phenomenon is unknown. The contrast ratio is to see the proportion of the local regional volume against the greater region, which we calculate by dividing the number of Vienna s URLs by Austria or Otaru by Hokkaido. Excluding Otaru s exceptional results in German and Spanish, approximately 50 percent of the greater region s volume corresponds to that of the local region in both cases. 48

A lot of tourism information about Austria, and Vienna as well, could be retrieved in English. Most used English, not their mother tongue German (see Figure 10). The rest was well distributed among the other languages. Information on Vienna is equally available in multiple languages which represents their in-scope markets, so that these are quite similar to their main and emerging source markets. It could be interpreted that Austria and Vienna are communicating globally as an international tourism destination. Table 13: URL Results using Paired Keywords in Each Native Language by Google Search (as of 21 February, 2011) Austria Vienna Contrast Hokkaido Otaru Contrast English 5,410,000 1,220,000 0.23 96,200 126,000 1.31 German 97,900 93,100 0.95 800 30,800 38.50 French 287,000 196,000 0.68 3,880 331 0.09 Italian 150,000 72,300 0.48 3,250 5,460 1.68 Spanish 800,000 230,000 0.29 11,600 66,700 5.75 Dutch 32,600 9,260 0.28 154 47 0.31 Russian 362,000 107,000 0.30 14,300 1,840 0.13 Japanese 275,000 264,000 0.96 753,000 331,000 0.44 Chinese 114,000 28,600 0.25 91,900 27,000 0.29 Korean 619,000 199,000 0.32 161,000 119,000 0.74 Average 0.47 *0.62 *excluding results in German and Spanish Tourism information on Hokkaido and Otaru are enormously available in Japanese. The proportion of the result corresponds to the fact that Hokkaido and Otaru are dominated by the domestic market. Japanese consumers are very rich in online travel information. In other words, DMOs like the HTO have a lot of competition in supplying tourism information to the consumer side. In comparison to Austria/Vienna, the volume of information in English is extremely small. Furthermore, the number of Chinese sites, which should be essential to Hokkaido s main foreign source markets such as Taiwan, Hong Kong, and China, is also smaller. This empirical result shows that the number of URLs can be used as a barometer of global reach, i.e. how attractive the destination is to the global market. Increasing the presence of diverse sites in the target markets, definitely in English and/or Chinese, will be a critical issue for Hokkaido tourism strategy. 49

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Austria Vienna Hokkaido Otaru Korean Chinese Japanese Russian Dutch Spanish Italian French German English Figure 10: Language Presence of Online Tourism Information by Destination by Google Search (as of 21 Feb, 2011) Phase II: Destination Search in Social Travel Media It comes as no surprise that Hokkaido and Otaru have not yet reached the social communication platform. To confirm this and retrieve more relevant results, the second experiment is built on the first empirical phase. The same keyword analysis was conducted within popular travel blogs sites and social travel guides as listed in Table 14. Table 14: List of Social Media Blog Name Website Concierge www.concierge.com Gadling www.gadling.com Lonely Planet thorntree.lonelyplanet.com Travel Blog www.travelblog.org I go U go www.igougo.com Real Travel www.realtravel.com 43 Places www.43places.com Trip advisor www.tripadvisor.com Virtual Tourist www.virtualtourist.com Trav Buddy www.travbuddy.com Travel Journals www.traveljournals.net Travel Pod www.travelpod.com My trip journal www.mytripjournal.com Travel Blogs www.travelblogs.com 50

As perceived from the blog names, they are all online portals for travel, the range of the information to be retrieved need not to be limited. In contrast to the phase I Google search, paired keywords limit the extracted results and report "no matching results. Therefore, just the name of the destination was used as a search keyword (see Figure 11 and 12). Furthermore as Wiki Travel is basically a single page description, it was excluded from these research samples. Using keyword: Austria Vienna Hokkaido Otaru Figure 11: Screen Shot of Destination Search in Social Media, Lonely Planet 51